Intended Users?

[Don Clark]

8)

Have been reading the information provided by the Appraisal Foundation for all aspiring Appraisal Foundation Certified USPAP Instructors(I am taking the 2.5 day course in June, wanted to be prepared ) Anyway, came across something that I thought might be of interest, and hopefully lead to some great discussions(The devil made me do it! :twisted: )
Seems that the foundations take on an inyended user is that they, the intended user, must be stated in any present assignment, and do not extend to any future assignment or reassignment of the current appraisal, and cannot be known at present as to any future assignment, and therefore, if I am reading correctly, would make invalid any assignment or reassignment of an appraisal by a current client or intended user, even if they put in such words as "Fly By Night Mortgage, and/or assigns". The example was simple. A home owner ask for an appraisal of his/her property to ascertain a value for listing purposes. The appraisers does the appraisal, for that purpose and states all known uses and users. The property then sells, and a grubby lender gets hold of the appraisal and wants the appraiser to change the report to their name, has the homeowners permission, and is will ing to pay a fee to have this done. However, the appraiser would now have to reappraise the property, for the new purpose, and state any now current and known intended uses and users of the appraisal. Effectively killing the old appraisal, and requiring a new appraisal. Lender then allows the reasigned appraisal to be reasigned to another lender, an even more grubby lender, who ask the appraiser to change to their name, has a letter from previous lender, and is willing to pay for the name change, but also needs an operating income statement as well as a set of listing comparables gridded on the report. This effectively kills the old reasigned report, and requires a new appraisal reflecting the new purpose, and stating all current intended uses and users of the new appraisal report.

I see this as an opportunity for the appraiser in several ways:

1. More control over who gets and uses an appraisers work
2. New and reasonable fees, if demanded by the appraiser, for any new work
3. Relieving the appraiser from liability of a report that was reasigned, without the appraisers knowledge to an unknown and unintended user.

Your comments and questions, please :?:

Don

 

[Steve Owen]

That's pretty much always been my take on it. It's been a Federal rule every since FIREA that an appraisal ordered by an individual could not be used by a lending institution. In the second situation it's the need for new work that kills the deal. You can only do an update for the original client.

 

[Pamela Crowley (Florida)]

Sure sound correct to me. I really like it since changing the name of the client has always made me squirm plus trying to go through the report to make sure I've changed everything that needs changing. Then the comments about the original report, client, etc...

Who's going to inform the lenders that they can't do this anymore???

They already couldn't care less about USPAP or any appraisers butt.

 

[Ray Ohler]

I could write a book on this. I've seen all kinds of variations done with "intended users". If you are ever in court and an insurance company pulls out YOUR appraisal don't sit there with your mouth hanging open. Nine times out of ten the judge will ask you if you prepared the appraisal. If you didn't, you're home free. If you did, get ready to support your appraisal. What would be interesting for a poll is to find out just how many appraisers believe that their "client" is the lender. If you do work for banks, "large" mortgage companies (i.e., Countrywide, Cendant, etc.), local savings associations, credit unions, they probably are the lender. If you do work for the thousands and thousands of "little" mortgage brokers out there, they probably ARE NOT the lender. Quick way to "check" on this is find a couple of appraisals you did for some mortgage brokers (usually not mortgage bankers). If you can access public records easily, check to see who funded the loan. THEY are the lender.

 

[Ray Ohler]

Pam was right, THE LENDERS DON'T CARE ANYTHING ABOUT USPAP.

 

[Fred]

Don,

I don’t see any actual changes in USPAP. Even before the invention of the term restricted in 1994, an appraiser was within ethical propriety
to explicitly Restrict the list of intended users to the client(s) only,
to identify the client as more than one party,
to fill the report with warnings to the intended users not to copy or distribute the contents of the report,
to fill the report with claims of no responsibility to any third party, etc..
The problem is that nothing an appraiser writes in the report legally binds anyone. You can put these restrictions in a contract, but they still don’t mean much.

It is my understanding that lenders are supposed to obtain the appraisals in a FIRREA related transaction and that if they use an appraisal obtained by someone else they would be contradicting banking regs. However, even if they do pass your appraisal around and some third party uses it, what are you going to do about it? Take them to small claims court” Call the Foundation? The Foundation has purview to monitor appraiser’s standards and qualifications, but no power to create and enforce law against the users of appraisal services, so their take on this, essentially a legal issue, doesn’t mean too much.

Don’t give up the fight though, I may have provided the occasional self-contained level of reporting under a restricted label, even including the word Confidential in the footer of every page.

The only new opportunity I see is that you can warn brokers and bankers that they MAY be in violation of GLB if they pass your confidential report around. You might be able to bluff someone with that.

 

[Austin]

I have a number of problems with this rule: 1. It doesn’t make sense to the general public. Have you even gone to a drink counter and asked for a paper cup to get some water and they say, “Sorry, we can’t give or sell you a cup because our management’s accounting system counts cups to determine the number of drinks we sell.” My response to that is “I want a cup for some water and I don’t give a darn about your accounting system. Who is the customer here, me or the management?” I will take my business elsewhere if I can’t have a simple paper cut. I was at the local baseball park this summer and heard them tell three people that while I was in line. The clerk had to explain the rule every time. 2. This rule is just rearranging the furniture on the deck of the Titanic. I get calls all the time from some homeowner that wants an appraisal and the mortgage company told them to get an appraisal and mail it to them. Totally illegal, but a common practice. The point being, this rule attempts to forces the appraiser to be a bank regulator at the appraiser's expense. If the lenders went by the rules we wouldn’t need this rule so why not regulate the offending party not the appraisers. We are not bank police. 3. In the general scope of things with drive-by appraisals, AVM, broker opinions of value, etc., the rule is as my grandmother use to say, “too much sugar for the scent.” Kind of like putting a $3,500 transmission in a $500 auto that is on its last leg. With all of the other problems, it just doesn’t make sense. Just how much depreciation can you cure with a $3,500 transmission? Not $3,500 worth I am sure. You cannot cure a depleted system with one new part. Another example of the people serving the system instead of the system serving the people. That is not why laws and rules were formulated. :roll:

 

[Ray Ohler]

It is not illegal for a homeowner to request an appraisal because their "mortgage broker" told them to get an appraisal. It is not illegal, in most states for the mortgage broker to USE that appraisal. It depends on the "banking regulations" and "regulated entities" in your state. The federal rule is "If the appraisal is to be used by a Federally Regulated Institution, then that institution has to directly engage the appraiser". Even another federally regulated institution CAN (not will) use an appraisal addressed or performed by ANOTHER federally regulated institution. IF that other institution abides by "certain" ....It gets VERY confusing, and you are 100% right...the appraiser IS NOT and SHOULD NOT be familar with all the different regs and rules and pending legislation. I'll give you a quick example of how crazy the confusion can get. TO BE CONTINUED.

 

[Ray Ohler]

I read my last post, noticed at least one error. In re: federally ...institution using an appraisal performed FOR not by. Sorry.
I'm not a lawyer and am not trying to portray any "expertise" with civil and/or criminal law. However, most people (including appraisers) don't have a clue about a certain subject until they have some experience with it. It is just the way it is. I was speaking with the chief of licensing of the PA Dept. of Banking two weeks ago. Seems there are a couple of "corporations" in PA who were formed as "providing first and second mortgages" for the public. Small problem. They aren't licensed to do so. Yeah, they have the "certificate of corporation" from the corporation bureau BUT THEY DON'T HAVE THE LICENSE FROM THE BANKING DEPARTMENT. Of course, they don't advertise in the Yellow Pages. They also don't work in "prestigious market areas". Hey, how many get requests from lenders every year, or every other year for their "certification"? How many would have the guts to ask a lender for a copy of THEIR license? All I'm saying is don't be duped. It's real easy for someone, especially if their client is "so nice", to inadvertently "look the other way" sometimes. Just be ready for ANYTHING these days.